Business Directories

Gold slips after Bernanke comments

Singapore, May 23, 2013

Gold fell for a third straight session on Thursday after US Federal Reserve chairman Ben Bernanke hinted at reducing an $85 billion bond-buying programme, which has increased the precious metal's appeal as a hedge against inflation.

While Bernanke said the central bank needs to see further progress in the US economy before the Fed scales back monetary stimulus, he also added that a decision to adjust it could come in the "next few meetings" if the economy looked set to maintain momentum.

Down nearly 20 per cent this year, gold could come under more selling pressure as investors increasingly price in a stimulus cut ahead of the Fed's next policy meeting on June 18-19.

Spot gold fell 0.06 per cent to $1,367.66 an ounce by 0327 GMT. It hit a low of $1,356.24 earlier in the session, near a two-year low of $1,321.35 plumbed in April.

"It does not matter if the tapering off (of the bond buying) is in this quarter or next or delayed by six months," said Dominic Schnider, an analyst at UBS Wealth Management. "If you know it's tapering off anyhow in the next 12 months, people do not want to be in there anymore."

Sustained outflows from exchange-traded funds also point to more downside for gold prices.

Holdings in SPDR Gold Trust, the world's largest gold-backed exchange-traded fund, fell 0.3 per cent to 1,020.07 tonnes on Wednesday, the lowest in more than four years.

China's factory activity shrank for the first time in seven months in May as new orders fell, a preliminary survey of purchasing managers showed, adding to concerns that a recovery in the world's second-largest economy and No. 2 gold consumer is sputtering.

The contraction is an "alarming sign", said UBS' Schnider at a time when physical gold demand in Asia has been normalising.

Premiums for gold bars hit a record high in Asia on Wednesday as lower spot prices lured more buyers, mainly in China, amid tight physical supplies.

Top gold buyer India, which had seen gold imports jump 138 per cent in April, is facing a slowdown as the peak wedding season comes to an end and its central bank imposes new rules to reduce a deficit. - Reuters